Cracks in the Crystal Palace

Transparent Factory Imago
Volkswagen's Transparent Factory, Dresden.
  • Why it matters

    Why it matters

    Uncertainty over the future of VW’s Transparent Factory in Dresden indicates a scaling back of the automaker’s ambitions.

  • Facts


    • The Transparent Factory, located in Dresden’s city center, cost €186 million to build.
    • The Phaeton luxury sedan, the factory’s only product, starts at €90,000. Only 4,000 were sold in 2014. The Phaeton will be discontinued after 2016.
    • VW’s supervisory board plans to keep the Transparent Factory open. A roadmap for the plant’s future will be adopted in February or March.
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It’s more than just an assembly plant. The Transparent Factory is Volkswagen’s pride and Joy, a €186 million ($202 million) prestige project that produces the automaker’s most expensive vehicle. The basic version of the Phaeton luxury sedan costs €90,000, though buyers are normally looking at six figures.

During times of crisis, however, there’s little room for prestige. Volkswagen faces the biggest crisis in its 78-year history.

The automaker has put aside €6.7 billion to deal with the fallout from systematically cheating U.S. regulators on diesel emissions. Moody’s has put the total cost of the scandal at €40 billion, while Credit Suisse estimates a cost of €78 billion in its worst-case scenario.

Volkswagen posted a third-quarter loss of €3.5 billion for the first time in more than 20 years. Stocks have plummeted by 37 percent since the scandal broke in September.

Given the difficult times, the automaker’s leadership is now mulling what should be done with its castle made of glass, located in the heart of Dresden. The Phaeton, the only car the plant produces in any significant number, was never a best seller by any stretch of the imagination.

“I've seen the new Phaeton, and I find it convincing. But it also has to make economic sense. A decision hasn't been made yet.”

Bernd Osterloh, Volkswagen's works council

Only 11,000 Phaetons were sold in 2011 and the number has plummeted to just over 4,000 in 2014. Eight are produced a day, most of which are sold in China. By way of comparison, Daimler sold 103,000 S-class vehicles last year.

Though sales hardly register, plans for a 2016 model Phaeton have been completed. It’s an open question, however, whether or not those plans will become reality.

“I’ve seen the new Phaeton, and I find it convincing,” Bernd Osterloh, the powerful head of Volkswagen’s works councils, told Handelsblatt. “But it also has to make economic sense. A decision hasn’t been made yet.”

There’s also an electric-powered version of the Phaeton in the pipeline, but it wouldn’t hit the market until 2019. If the 2016 model Phaeton is canceled, the Transparent Factory in Dresden would be left without a product to assemble for at least two years.

Several plans are under consideration for the plant’s future, one of which will be decided upon sometime in February or March, according to Handelsblatt sources close the supervisory board.

One decision has already been made – the Transparent Factory will not be sold or closed. Some 450 tourists visit the plant a day and tours are offered in 15 languages. Shutting the plant down would produce bad publicity.

Under one plan, the Transparent Factory would be one of the main pickup centers for customer orders. Buyers can already fetch their new Touareg SUVs and four-door Coupés CC there. Volkswagen’s chief executive, Matthias Müller, however, has indicated that he wants to keep producing cars at the plant.

“We have alternative ideas for assembly in Dresden,” Mr. Müller said. That’s good news for 200 of the plant’s 500 employees that still work on car assembly.

One idea calls for the plant to focus strictly on electric cars, which Volkswagen views as a major part of its future, producing the E-Golf and E-Up in addition to the electric Phaeton. Alternatively, the Transparent Factory could assemble the R-model, the sportiest and most powerful version of the Golf and Scirocco.

Then there’s the four-door Bentley Flying Spur. The luxury limousine has been produced at the plant for two years, though only two roll off the assembly line a day. The overwhelming majority are produced in England.

But Bentley, a Volkswagen subsidiary, is booming right now and the staff in Dresden has plenty of experience with the vehicles. The chassis for the Flying Spur is manufactured in the nearby city of Zwickau.

Opting for this plan, however, would mean moving away from Volkswagen’s core brand. Fortunately, the supervisory board would be spared the embarrassment of removing Volkswagen logos from the plant’s exterior: None hang from the Transparent Factory.


Christian Schnell covers the automotive industry for Handelsblatt. To contact him:

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